Job Order Costing

Job order costing is used for mass production
➛ False
It is used for customized or unique production.

Each job has its own cost record
➛ True

Direct labor is an indirect cost
➛ False
Direct labor is a direct cost

Overhead includes indirect costs
➛ True

1. Job order costing is used for customized / unique production

2. Costs are recorded on a job cost sheet

3. Total job cost includes materials, labor, and overhead

4. Unit cost is calculated by dividing total cost by number of units

A job has

Tasks
➛ Calculate total job cost
➛ Calculate unit cost

Total Job Cost
4,000 + 2,500 + 1,500 = 8,000

Unit Cost
8,000 ÷ 50 = 160

Total Job Cost = $8,000
Unit Cost = $160 per unit

State whether the business uses Job Order Costing or Process Costing

➛ A custom house builder
➛ A soft drink factory
➛ A printing company
➛ A car repair shop

A company produces custom-made desks for clients. Each order differs in size and materials.

Questions

Which costing system should be used?
➛ Job Order Costing

Why is this system appropriate?
➛ Because each desk is customized and costs vary per order.

What costs must be tracked?
➛ Direct materials
➛ Direct labor
➛ Manufacturing overhead

How does this system help pricing decisions?
➛ It helps determine the exact cost of each job, allowing proper pricing and profit calculation.

What is job order costing?
➛ A costing system where costs are assigned to specific jobs or orders.

Name two components of job cost
➛ Direct materials and direct labor | or overhead

What is a job cost sheet?
➛ A document that records all costs for a specific job.

How is unit cost calculated?
➛ Total job cost ÷ number of units

Name one business that uses job order costing
➛ Construction company
➛ Printing company
➛ Repair service

---

Process Costing ➧ Here